It’s the perennial Quorum Quandary: as co-ops and condos prepare for their first annual meeting of the 2020s, they face the age-old problem of attracting a quorum so that the meeting can be official and a valid board election can be held.
Why is it important for shareholders or unit-owners who can’t attend to fill out a simple proxy form and either mail it in or drop it off at the management office? Because without that smidge over 50 percent of the co-op’s outstanding shares or the condo association’s common interests being officially present – either in person or through a proxy – then the meeting isn’t valid, you can’t elect board members, and you may have to go through the time and expense of setting up another annual meeting and hoping enough people are present next time. Unless…
Timing Is Everything
There are some relatively stress-free ways to attract the elusive quorum. Some involve scheduling. Others involve the phrasing of notifications. Some boards offer door prizes; others offer food. And thanks to a new law, it’s now possible for some residents to vote online.
“I find the boards that are most successful in getting a quorum are those that make an effort to keep the shareholders or unit-owners informed during the year,” says Howard Schechter, a partner at the law firm Armstrong Teasdale. “They use the annual meeting as an opportunity to bring residents up-to-date on items they’re already aware of that are in the works, so that they want to come to the meeting.”
The most basic thing, say attorneys and others interviewed for this article, is to schedule the annual meeting on a date and at a time convenient to most residents.
“It really depends on the building,” says Schechter. “Some boards call a meeting for 4 o’clock in the afternoon, and everybody shows up, either because they’re all retired or they all own their own businesses and can set their schedule whenever they want. But if you’re dealing with people who have a job they commute to, they’re not usually going to be able to make a 4 o’clock meeting.”
Some governing documents specify a time frame for annual meetings. “The bylaws may say, for example, that your annual meetings must be held in May of each year,” says Marc Schneider, managing partner at the law firm Schneider Buchel. “Others will say they must be held around one year from the date of the previous annual meeting.”
Holidays and popular vacation seasons should be taken into account. “You certainly don’t want to do it on a religious holiday,” says Schechter, “and you don’t want to make it the day before any holiday, when people may be out of town or leaving town. You don’t want to make it on a Friday night, because a lot of people have other things to do on Friday night, religious or otherwise.”
And then there’s an informal notification before the mandated notification. “I often suggest a ‘save-the-date’ notice,” says Lisa Smith, a partner at the law firm Smith, Gambrell & Russell. The New York Business Corporation Law, which governs cooperative corporations, specifies that annual-meeting notices go out no more than 40 days and no fewer than 10 days in advance, and a condominium may similarly have a required time frame in its governing documents.
“Nothing stops you from sending a notice in advance, like with a wedding, you know?” Smith says. “Just an informal memo that the managing agent might send out or post in the mailroom.” The required official notification, of course, still goes out later.
Return Envelopes and Other Nudges
That notification typically contains a proxy, a document authorizing a specified person to vote in the apartment owner’s stead. Since the absent owner’s votes will be present, that counts toward fulfilling the quorum.
A pre-stamped return envelope is sometimes provided as well. Does that help? “I will say usually it helps,” says Dean Roberts, a member at the law firm Norris McLaughlin. “If you’re talking a 2,000-unit co-op, that’s an extra $1,000 just for the stamps. So there’s a cost-benefit analysis.”
In any case, it’s dependent on your type of population. “At a new-construction condominium in Williamsburg, the unit-owners may not even know what an envelope is, since they do everything electronically,” Schechter says with a laugh. “Whereas an old-time Upper East Side co-op where most of the people are advanced in years, they might only use the U.S. Mail.”
Another consideration is the wording of the notice. While most follow the same boilerplate, Roberts suggests something behavioral scientists call “nudge theory.” It’s all about how you phrase things. For example, the British tax-collection agency found that changing the sentence “Nine out of 10 people in the U.K. pay their tax on time” to “The great majority of people in [the specific area in which the taxpayer lives] pay their tax on time” nudged more people into paying their income tax on time. The underlying idea is that people are generally more comfortable adhering to social norms than not.
Mixing Business and Pleasure
“Many boards we represent use the annual meeting as an opportunity for a social event,” says Schechter. “So they have some sort of reception before or after the meeting. There’s wine and cheese in the lobby, or it could be coffee and cake served when the meeting is complete.” Pizza is a staple, but it doesn’t stop there.
“One of my co-ops last year brought a food truck in to help get a quorum,” says James Glatthaar, a partner at the law firm Bleakley Platt & Schmidt. “When people signed in, they got a ticket entitling them to a double burger, large fries, and one drink. People absolutely loved it.”
This was at the Broadlawn, a 121-unit co-op in White Plains. “We hadn’t had a quorum for a while,” recalls the board president, Steve Perlman, a chiropractor, “and I was trying to think of a way to get people to show up. One of my patients owns a couple of food trucks, and I thought if we promoted this, the meeting would get more interest. As soon as people heard they could have dinner there, it was really appealing to everyone.”
After the meeting, “everybody came up and thanked me over the next couple of weeks,” Perlman says, “We’re going to do it again this spring.”
Some small co-ops and condos hold their annual meeting in a restaurant. “One co-op I used to live in had their annual meeting at a Thai restaurant in the building,” says Glatthaar. “You show up, you get a free dinner. They don’t have a problem with quorums.”
Hot Buttons and Door Prizes
Another popular tactic is to put a referendum or a non-binding resolution on the ballot – a ban on smoking, say, or on pets – some issue just to get the quorum. However, there are limits. “I’m not recommending that you raise the common charges as a way of getting a quorum,” Schechter says. “But if you’re going to do it anyway, instead of doing it two weeks before the annual meeting, maybe announce that you will discuss the increase at the meeting. That always turns people out, especially if it’s more than just a nominal increase.”
Some boards offer door prizes, ranging from televisions to tablets to gift certificates at an Apple store. But not everyone believes such giveaways are appropriate. “You shouldn’t be using community funds to entice the quorum,” says Schneider, who recalls one co-op where the prize was a free month’s maintenance. “If I were a shareholder in a co-op and my money was being used to buy a TV to give away, or a free month’s maintenance, I’d have an issue with that.”
What about telling homeowners that if X number of them don’t attend or send in a proxy, there will be no quorum and no election? “I don’t think that’s the most persuasive item,” says Schechter.
Roberts agrees: “The number doesn’t matter, because if I tell shareholders I need 50 of them as opposed to ‘I need you to come down,’ they may look at it like, ‘Oh, 50, meh, I don’t know. Somebody else will go.’ If you just say, ‘We need a quorum to show up,’ they figure it’s a high number.” And, he believes, they will be more likely to attend.
Schneider adds, “Whether you need 50, 100, or 300, it’s not like you have a running ticker where everybody’s getting an email every day saying, ‘We’re 20 short, we’re 10 short.’ “
But if you know you won’t reach a quorum before the meeting, he notes, boards have two options: “Either do an email blast or call them and say, ‘Hey, we’re five proxies shy. If you can’t attend and haven’t sent one in, please make sure you do so we don’t have to re-notice the meeting and spend significant additional monies to do so.’”
The Online Option
A small number of boards have been using online voting in an effort to make the process as convenient as possible, using such companies as Elections Online, Survey & Ballot Systems or BigPulse. One attorney says the online-voting system at one co-op he has represented allowed voting for one week before the annual meeting and up to 11 A.M. on the day of it. But since the Business Corporation Law that governs co-ops was amended as of Oct. 23, 2019, to allow electronic voting, attorneys are divided on whether prior elections that included electronic voting were legal. “That’s a matter of opinion,” says Schechter. “There hasn’t been a test in a court where the validity of that procedure has been tested or determined. So I happen to think that under the state of the law prior to this amendment, what was authorized was the electronic collection of proxies, but not electronic voting.”
Whatever the case, the update to the law affects only co-ops. Condo voting takes place under the state’s Condominium Act, which states that the bylaws control elections. So a co-op board can have an online election, but a condo board should check with its attorney to see if it’s allowed by the bylaws.
“Online voting is helpful,” Roberts says. “I had a recent condo election where they had not gotten quorum for a couple of years. We did online voting, and we got a quorum. Online voting is an enhancement. It is simply another tool in the toolbox of elections.”
No Official Business
Another method of encouraging a quorum is to have a guest speaker at the annual meetings. Often, this means a local elected official. “They will show up,” says Roberts. “They want face time.”
If a board is tempted to institute a token fine for those who don’t at least provide a proxy, attorneys advise against it. “I have seen that attempted,” says Schneider. “The answer is absolutely not. You can’t force somebody to vote. You’re making somebody do something they don’t have to do. It is a right and a privilege, not a requirement. And by the way, someone’s silence is often speaking their opinion on the issue.”
Finally, do you even need a quorum? “The short answer is no, but then you don’t have an effective annual meeting,” says Roberts. “You can’t vote on directors or a bylaw amendment. It’s basically by default just an informational meeting.”
Smith, the attorney, adds: “If you don’t have the quorum, there are a lot of things you can’t do. You’re not transacting business – just giving reports, and you can have a Q-and-A, so it’s basically the equivalent of a town-hall meeting.” You even need a quorum if no one new is running for the board and the old board members want to stay on – though in that case, the board can forgo a formal vote and homeowners can reappoint them via voice-vote acclamation.
Ultimately, if shareholders or unit-owners don’t show up, “don’t take it personally,” Smith says. But with all these new tricks and tips at your disposal, chances are good that they will.